When Nigerian banks first arrived in Uganda, they came with bold intentions. United Bank for Africa (UBA) entered in 2008, followed by Guaranty Trust Bank (GTBank) in 2013. Both lenders projected confidence, backed by their continental networks and strong brand names, and vowed to introduce new competition in a market long dominated by East and Southern African players.
More than a decade later, those promises remain largely unfulfilled. Their market share remains limited, profits are thin, and operations are constrained. UBA and GTBank now trail regional peers that continue to expand reach, deposits, and lending activity in Uganda’s financial sector.
Capital Requirements and Regulatory Constraints
The regulatory environment tightened in January 2023, when the Bank of Uganda revised the minimum capital requirement for Tier I commercial banks from UGX 25 billion to UGX 150 billion. GTBank couldn’t meet the threshold and was downgraded in 2024 to a Tier II credit institution, cutting off access to key revenue streams like current accounts and foreign exchange trading.
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UBA retained its Tier I status, but with an asset base of UGX 595 billion as of December 2024, its ability to scale remains restricted. The bank’s reliance on government securities for profitability leaves little room for aggressive lending or long-term investment in its operations.
Profitability Gap and Market Share Erosion
The performance gap is evident in recent earnings. Uganda’s banking sector recorded UGX 1.6 trillion in net profit in 2024. UBA Uganda recorded UGX 6.9 billion in net profit after tax, while GTBank’s numbers were similarly marginal. By contrast, Stanbic Bank Uganda posted UGX 478.1 billion in profit, and Centenary Bank earned UGX 342.28 billion. Together, they accounted for nearly three-quarters of the sector’s total profit.
Like most banks in the country, UBA holds a large portion of its portfolio in government securities. In 2022, industry exposure to sovereign debt reached 208% of Tier I capital, further limiting funds available for private-sector lending and reducing interest-based income potential.
Macroeconomic Pressures and Risk Aversion
Uganda’s macroeconomic environment has also posed challenges. As of August 2024, the benchmark interest rate stood at 19.1%. High borrowing costs, currency depreciation, and inflation have led to reduced demand for credit. For banks with relatively smaller capital buffers, including UBA and GTBank, the margin for risk is much narrower than it is for larger competitors.
Lack of Local and Regional Integration
UBA and GTBank have also struggled to align their operations with Uganda’s economic landscape. Their business models, largely imported from Nigeria, have not adapted to the local structure, which depends heavily on agriculture, SMEs, and informal finance.
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In contrast, Kenyan and South African banks have developed localized strategies. Equity Bank has built its offering around microfinance and agricultural credit. Stanbic has introduced services like Stanbic4Her and FlexiPay, targeting underserved segments and aligning with national development goals. These models have delivered both commercial and community value, something Nigerian lenders have yet to match.
GTBank’s reclassification as a Tier II institution has also stalled investments in digital platforms, while UBA’s digital presence remains relatively weak compared to Equity’s EazzyBanking or Stanbic’s FlexiPay, which continue to drive customer acquisition and usage.
Comparative Disadvantages and Historical Lessons
Timing is another factor. Nigerian banks entered Uganda long after dominant players had established their footprints. Stanbic opened in 1991, while Centenary began operations in 1983. By the time UBA and GTBank arrived, most of the market was already spoken for.
Their experience echoes lessons from Ghana’s 2017–2020 banking crisis, where several undercapitalized banks exited the market following stricter regulatory enforcement. While UBA and GTBank have continued to operate in Uganda, their slow growth and regulatory setbacks show early signs of the same vulnerabilities.
Jefferson Wachira is a writer at Africa Digest News, specializing in banking and finance trends, and their impact on African economies.